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This Blog addresses the Employment Development Department’s Work Sharing program in light of COVID-19.

Work Sharing Arrangements  

Work Sharing is a way of supplementing an employee’s wages when their wages and hours have been significantly reduced due to economic reasons. It is essentially a hybrid between employment and unemployment. For example, an employer could implement a Work Sharing plan reducing the work week of all employees from five days to four days (20 percent reduction). Those employees would then be eligible to receive 20 percent of their weekly unemployment insurance benefits.

Per the Employment Development Department (EDD), employers can apply for the Unemployment Insurance (UI) Work Sharing Program if reduced production, services, or other conditions cause them to seek an alternative to layoffs.[1] The Program helps employees whose hours and wages have been reduced by providing supplemental benefits, allowing them to keep their job, and to avoid financial hardships.[2] Avoiding layoffs is beneficial for employers because it helps them minimize the costs of recruiting, rehiring, and training new employees.[3]

An employer is charged for the Work Sharing Program the same way as regular UI benefits. Each plan is effective for 12 months before needing to be renewed. Like regular UI recipients, employees must serve a one-week unpaid waiting period before joining a plan.

Requirements for Work Sharing

To Participate, employers must meet all the following requirements:

  • Be a legally registered business in California.
  • Have an active California State Employer Account Number.
  • At least 10 percent of your regular workforce, and at least two employees, must be affected by reduced hours and wages.
  • Hours and wages must be reduced by between 10 and 60 percent.
  • Health benefits must remain the same or meet the same standards as other employees not participating in Work Sharing.
  • Retirement benefits must meet the same terms and conditions as before or must meet the same benefits provided to other employees not participating in Work Sharing.
  • The collective bargaining agent of employees in a bargaining unit must agree to voluntarily participate and sign the Work Sharing application.
  • The employer must identify the affected work units to be covered by the Program and identify each participating employee by their full name and Social Security number.
  • The employer must notify employees in advance of its intent to participate in the Program.
  • The employer must identify how many layoffs will be avoided by participation.
  • Provide the EDD with any necessary reports or documents relating to the Work Sharing plan.

Restrictions

The following employees are not eligible:

  • Leased, intermittent, seasonal, or temporary employees are not eligible.
  • Corporate officers or major stockholders in the company are not eligible.
  • The Work Sharing Program cannot be used as a transition to a layoff.
  • An employee must have completed a normal work week with no reductions prior to participating in the program.
  • If an employer has multiple locations, they can only participate in one Work Sharing plan.
  • Employees may work part time for another employer while receiving these benefits, but this may reduce the benefits they receive.
  • Employees must have qualifying wages in the base quarters used to establish a regular California unemployment insurance claim, calculated by one of two alternative methods: the Standard Base Period and the Alternative Base Period. The Standard Base Period is the first four of the last five calendar quarters prior to filing the claim. The Alternative Base Period is the most recently completed four calendar quarters prior to filing the claim. If the employee has earned at least $1,300 in one quarter of either type of Base Period, or $900 in one quarter of either type of Base Period and total base period earnings are 1.25 times the highest quarter’s earnings, then the employee would qualify. For more, see https://www.edd.ca.gov/pdf_pub_ctr/de8714ab.pdf

Are Salaried Employees Eligible?

The California Department of Labor Standard Enforcement (DLSE) has gone back and forth on whether salaried employees can benefit from Work Sharing programs.[4] Currently, the DLSE permits participation if there is a bona fide reduction in both hours and salary, as long as it is not fluctuating, though the opinion does not mention the EDD Work Sharing program specifically.[5] It is still unclear how courts will rule on this issue.

The Work Sharing plan differs from a partial unemployment claim because an employer can create a plan for their entire company all at once, instead of making claims for each individual employee. To apply for the Work Sharing plan, complete and mail the Work Sharing (WS) Unemployment Insurance Plan Application (DE 8686) (PDF) to the EDD at the following address:

EDD Special Claims Office

P.O. Box 419076

Rancho Cordova, CA 95741-9076

Interested employers can call the EDD Special Claims Office directly by calling 916-464-3343. More information can also be found here.

What This Means for Physical Therapists

What the Work Sharing program means for physical therapists is they have a way to deal with the reduced business they may be experiencing due to “shelter in place” orders caused by COVID-19. A Work Sharing program is a great way to scale down the expense of running a physical therapy clinic while keeping your salaried workers employed. Health providers can scale down the hours of receptionists, administrative and accounting personnel, aides, and assistants, without having to rehire and retrain in the future. With this program, as soon as the “shelter in place” orders are lifted, businesses can quickly revert back to their normal full schedules with the same employees. This is important because there is no knowing how long this epidemic will last.

What to Expect Next

It is important to keep in mind that the COVID-19 epidemic is a global phenomenon that is changing every day. Therefore, the best thing one can do is to keep checking in with state and federal agencies to keep up to date on the requirements of employers to ensure continued compliance. For further information, please contact Simas & Associates, Ltd. at 888.999.0008 or info@simasgovlaw.com.

[1] Employment Development Department, Work Sharing Program, https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm.

[2] Ibid.

[3] Ibid.

[4] DSLE Opinion Letter (March 12, 2002), at 5, finding that exempt employees whose hours are reduced are no longer compensated on a “salary basis” per 29 C.F.R section 241.118(a), and are therefore no longer salaried, which means they are eligible for overtime and technically are not salaried employees using the Work Sharing program.

[5] DSLE Opinion Letter (August 19, 2009), finding that a reduction of days worked and corresponding salary reduction for exempt workers is allowed under California law, as long as their salary is in line with the salary basis test set forth in labor Code section 515(a). The opinion does not mention the EDD Work Sharing program directly, however.